Amarjeet Sinha, the top official in the local education department, told reporters that cooking oil used at the school in Chapra District, 40 miles from the Bihar state capital of Patna, had been stored in or near a container previous filled with pesticide.

Sinha said notices published on Thursday morning in local newspapers ordering headteachers to taste food and to ensure safe storage of ingredients would "dispel any fear in [children's] minds that the foods are unsafe."

Children across Bihar, one of the poorest states in India, have been refusing to eat free school lunches since the incident on Tuesday.

However the move has done little to allay concerns. Critics pointed out the directive only restated existing orders which were rarely followed and impossible to enforce.

Angry bereaved parents have defied local administrators to bury victims, all aged between 5 and 12, in the grounds of the school.

Police are searching for the headteacher, accused of forcing the children to eat even after they complained of a strange taste, and her husband, owner of the grocery store where the ingredients were sourced. Both appear to have fled as the extent of the tragedy became clear.

However medical staff said the other children currently being treated in Patna, the state capital 40 miles from the school, would all survive.

Dr Amarkant Jha Amar, superintendent of the Patna medical college hospital, told the Guardian that "the children were recovering fast".

Manju Devi, one of the two cooks at the school, described how she and her three children, ages 5, 8 and 13, had fallen ill after eating some of the contaminated food.

"Thank God, my children and I are now safe," Devi, 30, said.

However two of the three children of a second cook, Pano Devi, died. A third, a 4-year-old daughter, was hospitalised.

"I will stop cooking at the school," said Devi, who did not eat the tainted food. "I am so horrified that I wouldn't grieve more if my only surviving child died."

The two cooks said they warned the headteacher there was a problem with the food.

The incident has exposed both the deep problems with India's vast free school meals programme and its healthcare system.

The local clinic near the school lacked even basic medication and equipment, ambulances were not available and none of the monitors in the intensive care unit in the state's main hospital, where another 26 children are currently under treatment, were in working order when casualties arrived. Specialist medication to counter the effects of poisoning was not immediately available.

Lal Deo Mahato told the Indian broadcaster NDTV that he was working in rice fields when he heard that his daughters had fallen ill at their school.

One daughter, aged four, survived, but his eight-year-old died in his arms on the way to Patna, Mahato said.

The Midday Meals programme is one of the biggest such schemes anywhere in the world, covering more than 120 million children. Prices of meat, fruit or fresh vegetables have soared in recent years, leaving parents in poorer families reliant on school lunches to ensure adequate levels of nutrition. However, the scheme is plagued by waste and corruption. Incidents of poisoning are common, though rarely this serious.

School meals in India are usually provided by contractors. Many use substandard ingredients and pay officials to turn a blind eye. Grain purchased by the government for distribution is often poorly stored.

According to the World Bank, 43% of Indian children are underweight – the highest level in the world and a figure that has remained constant for at least 20 years. In China the figure is only 7%; in sub-Saharan Africa it averages 28%. Poor nutrition among lactating and pregnant mothers means the effects of post-natal malnutrition for children are exacerbated.

The government, led by the Congress party, is pushing for a massive £14bn expansion of the country's food subsidy programme. Congress, which controls only half of India's 28 states, won the last two general elections after introducing populist policies such as a rural jobs scheme and a £8.3bn waiver programme for farmers' loans.